ChargePoint Holdings, Inc. (CHPT) Management Presents at Evercore ISI Global Clean Energy & Transition Technologies Summit Conference (Transcript)
ChargePoint Holdings, Inc. (NYSE:CHPT) Evercore ISI Global Clean Energy & Transition Technologies Summit Conference Transcript June 15, 2023 4:00 PM ET
Executives
Pasquale Romano - President and CEO
Analysts
James West - Evercore ISI
James West
Okay. Well, good afternoon, everyone. We are going to stay on the EV charging team for the last fireside chat of today, which will conclude the day one of the conference to the summit. We are always excited to hear the perspective of a company who can be thought of as the index for the electrification of mobility as it fuel -- as it fuels all types of electric vehicles across all use cases with its Level 2 and DC fast charging products.
Of course, we are talking about ChargePoint here and with us today is CEO and President, Pasquale Romano. ChargePoint enjoys an advantage of its scale, land and strategy, consistent focus on R&D and new software and hardware advancements.
As an EV infrastructure designer and manufacturer, ChargePoint is agnostic storage equipment is installed. In other words, investors don’t have to determine exactly how the mega theme of electrification mobility unfolds. Pasquale, thanks for joining us.
Pasquale Romano
All right. If you ever want to join sales. You actually technically are at sales. Yeah.
James West
Yeah. Somewhat. Yeah.
Pasquale Romano
It’s good job.
Question-and-Answer Session
Q - James West
Perfect. So you had a pretty long history in ChargePoint, but you have been there for most of its life cycle. Could you tell how the market has evolved given -- during your tenure before and how you see the next evolution of the market?
Pasquale Romano
So this is an odd one of the four jobs I have ever had in my life, all in new markets. I have never had to not pivot a little, at least a little bit. So the thesis for the company at the beginning was unlike liquid fuel that’s environmentally hazardous, dangerous to store, all that stuff, electricity is pervasive.
So assuming that you can onboard electricity anywhere and that it’s pervasively distributed then changes the fueling patterns, so pattern matching on how gasoline is accessed by consumers isn’t a good way to think about how electricity will be accessed by consumers.
James West
Right.
Pasquale Romano
So that’s how we thought about it. So we said it will be generally onboarded when the car is parked. Most of the fuel is going to come on and the only time that you are going to replicate what is a liquid fuel model of today is when you are driving on your battery range and you need to…
James West
Okay.
Pasquale Romano
…stop and reload, because you don’t have enough charge to get to your ultimate destination. So if you look at it from that perspective, you say, well, where is the car park most of the time to understand what verticals that you need and what products and services you have to design, you assume that it’s going to be unattended that it’s not going to be core to the business most businesses that are going to be buying us stuff.
So you look at much more like public WiFi accessibility, right? And then you do gasoline, although, you do look at it from the traditional fueling perspective for the long-haul driving segment…
James West
Right.
Pasquale Romano
… with the twist that you need a lot more real estate associated with parking, because the dwell time is longer when you are onboarding a fuel.
James West
Right.
Pasquale Romano
I will pause there. It hasn’t changed much since the…
James West
Since the origin.
Pasquale Romano
…since that beginning. So that’s why you see us in every vertical.
James West
Right.
Pasquale Romano
Right. Because to be relevant to drivers to the fuel -- the -- it’s a very diffuse fueling model. So you have kind of got to be in every vertical and then you can attach your revenue, you can’t necessarily attach your revenue to electricity, because if a business wants to give power away as a marketing expense to attract customers or endure themselves to customers or make it an employee benefit of the combination. If you attach your revenue solely to the sale of energy and the sale of energy is not what the business wants to do…
James West
Right.
Pasquale Romano
…then you have attached to something that puts you in conflict with your customer.
James West
Right.
Pasquale Romano
So it’s that simple.
James West
Is that ultimately how you think a lot of these specific retail will go and maybe office parks too?
Pasquale Romano
Yeah. I mean...
James West
The employee perks and...
Pasquale Romano
Yeah. I mean, not -- I don’t know if there any oil and gas people in here. I don’t want to attend the oil and gas folks too much. I do that enough. But the challenge with driving on electricity for the energy industry at large, just think of it greater than the electricity industry, but overall energy is that, you are dramatically reducing the cost. So you are putting electricity in a category where you can, in some cases, treat it like an amenity, marketing spending, et cetera…
James West
Right.
Pasquale Romano
That’s not possible with gasoline because of its cost. But it is possible and plus the dispensation restrictions on it, you can’t do it at a retailer broadly, because he wants a tank in the ground, all that stuff. So when you think about it that way, you basically says, wait a minute, a big portion of this is not necessarily going to be driven by needing to make money on it directly.
James West
Right.
Pasquale Romano
It may have attribution value but not direct. So it’s taking a perfectly good energy industry and kind of watering it up in a ball and throwing in the test.
James West
Right. Right. Right. Makes sense. So we do talk about you guys being agnostic about where your equipment goes because you are just selling hardware. But are you truly agnostic, I mean, there’s going to be some interplay between brand recognition too?
Pasquale Romano
Well, okay. So I don’t quite understand is that from the perspective of we care, like, when I was a little, my mom used to tell me that who I hung out. I was going to be judged by other parents by whom I dance with. Kind of furious, okay. Just trying to put in perspective. I am from New Jersey, by the way, so other people from the room must have had their moms say the same thing.
But, yeah, no, so look, where you want to be careful is how you construct and we are doing a lot of work on this, by the way, where you construct your business models to guarantee that the equipment and the service stays in good working order and is cared for and the surroundings do matter a little bit there.
And so the question is, if it’s public facing, what are the evolution of the existing business engagement with those customers to make sure that absolutely bullet for drivers and we have got good reliability on our network right now, but we would like to make sure that it doesn’t ever get into a state of the case. So how do we require that next level engagement from business customers that want to put it out there.
James West
Right.
Pasquale Romano
So we are not agnostic to that.
James West
Right.
Pasquale Romano
What we are agnostic to is does in the long-term one sub-vertical of our business outperform another, because if you are in it enough, you become less sensitive to short-term dynamics or long-term dynamic shifts.
James West
Right.
Pasquale Romano
Like we couldn’t have predicted COVID who could have that dramatically changed our workplace business.
James West
Right.
Pasquale Romano
If we were only workplace focused.
James West
Yeah.
Pasquale Romano
I wouldn’t be sitting here and I probably would have asked you if there was another company you were covering that needed…
James West
Okay.
Pasquale Romano
Okay. Because I would be dead, we would be out of business.
James West
Yeah.
Pasquale Romano
Right. And so that’s the level of agnostic that I usually refer to.
James West
Okay. Okay. Got it.
Pasquale Romano
I do care who my friends are.
James West
I know.
Pasquale Romano
But I am still hanging with you.
James West
Just one the -- that’s great. I appreciate that. So how do you think about scale and the importance of scale in your business, because you are hitting scale. I mean you are at scale now?
Pasquale Romano
Yeah. So...
James West
And we are watching you accelerate too.
Pasquale Romano
Yeah. So scale is -- there’s no negatives to scale.
James West
Yeah.
Pasquale Romano
The positives -- the obvious positive that everyone goes, yeah, of course, I thought that already was, when you are manufacturing hardware as a component of what you do, always software attached.
But there’s a hardware delivery vehicle to the charging experience, it’s sitting there and you could see it and touch it and use it. Those things always benefit from volume, from a cost structure perspective.
And so then it becomes, do you have access to when supply chains get tight like we have -- I am beginning the discussion, we have capacity reservation agreements in place with silicon carbide, MOSFET manufacturers, because we have to guarantee that we can have assurance of supply. If you are a little, that’s hard.
James West
Okay.
Pasquale Romano
If you don’t have scale, no one’s going to put one in place for $200,000 worth in the parts. No one’s going to do that…
James West
Right.
Pasquale Romano
… because it’s not worth the legal fees…
James West
Right. Just on the deal…
Pasquale Romano
… to do the contract. So that matters there. It matters in costs. You have to have multiple CMs in your mix globally positioned to access global supply chain. You have to be in both markets. It’s one of many reasons we are in Europe.
It’s -- if you are isolated to one geography and the market has other well-developed companies that can run on in other markets, they can swim across whatever ocean…
James West
Right.
Pasquale Romano
… to attack you where you are and so the best defense there is get bigger, faster.
James West
Right.
Pasquale Romano
And so then you look at the network effect on the software side. So if you are a company and you have -- you are a multinational and you have got offices everywhere, fleet everywhere, what have you. You don’t want to have to do a bunch of software integrations, because you are betting on a local hero that’s only accessing one market because they are small.
James West
Right.
Pasquale Romano
So scale matters in the decision for larger companies to broadly be one partner. Ecosystem integrations go the same way.
James West
Okay.
Pasquale Romano
So if you are going to -- we are a fuel card provider integrated, doing a lot with lease goes in Europe, et cetera, without scale, you don’t get that.
James West
Right.
Pasquale Romano
And once you have that, then it feeds the halo effect for other verticals to make the decision to go with you. So I think it consolidates -- it has to consolidate in the scale.
James West
One of the other moats I think you have is your channel partners. I think it’s a huge competitive strength and something you guys thought about very early on and others didn’t and they are going to struggle because they don’t have the breadth. Could you that strategy, how you develop strategy and how it’s working out for you?
Pasquale Romano
So I have had -- in my almost 13 years of ChargePoint, I have had more arguments with our finance team about what’s the channel in the early days? So what’s this channel doing for except for taking margin?
James West
Right.
Pasquale Romano
Just so you know, we thought of that, okay. So you have that argument because when you are small and you are not at scale and you are trying to develop a channel. You sit there and say, for the discount, I have to give these folks and I am still going to handhold them on the customer sales process they are going to develop other collateral. It’s really not out. It’s still somewhat of a push market or a hand sell market. It’s not a pull market. And this is -- you seven years ago…
James West
Yeah.
Pasquale Romano
Exactly like I just described. Why are you doing this? You might just keep the margin and not burn as much cash, wouldn’t that be good? Well, when you do need it, it takes a long time to develop…
James West
Develop.
Pasquale Romano
… because they have to develop the internal practices to manage their downstream EPCs, electrical contractors, all the people that buy from them and now we are seeing the advantage for not only, as it shifts to a pull market, business just starts to show up at the local office of a Rexel or Sonepar, border state or the usual electrical distribution types.
James West
Right.
Pasquale Romano
But they are proactively grooming the electrical contractors that visit with training programs, lunch and learns, all that sort of stuff. We are building tools, mobile apps, things like that for those folks, certification programs. So unless you build that muscle translating yourself into it is very challenging…
James West
Right.
Pasquale Romano
… when the market is running and then the other problem that you suffer is our gross margin, which is now on a pretty steady improvement cadence since we are out of last year’s or the previous couple of years…
James West
Supply chain.
Pasquale Romano
… supply chain problems, it’s already contemplated the majority of our revenues suffering in channel margin.
James West
Right.
Pasquale Romano
So if you want to transition into channel, then you have to suffer the reduction…
James West
Right.
Pasquale Romano
…. in margin and the recovery -- the margin recovery and that’s hard to do while you are investing in the channel and they have already got us positioned in the channel, right, and all that sort of stuff. So this is going to turn into -- we are already doing thousands and thousands of transactions a quarter. It’s just going to be a mind-numbingly diffused market.
James West
Right.
Pasquale Romano
And I don’t see how you attack it with a direct sales force, it’s impossible.
James West
Right. Right. And costly little bit.
Pasquale Romano
Yeah.
James West
I’d love to -- I know we talked about it on our conference call the other day, but I’d love to give further detail on the Ford, GM announcements, the Tesla Supercharger networks, the technical changes you may have to make, but also if you have any views on the technical changes that the OEMs have to make to be able to you into those?
Pasquale Romano
You are the first person asked me that question.
James West
I am sure.
Pasquale Romano
Yeah. I haven’t gotten that all day.
James West
I would mention not just you. We are asking these four questions up here.
Pasquale Romano
Yeah. So let’s just talk about the technical changes. So and the -- the Tesla has always had the ability to charge on a CCS plug with an adapter that Tesla offer, I have one for my Tesla.
James West
Yeah.
Pasquale Romano
And I don’t use that after all the time with ChargePoint chargers. When you plug that adapter into a Tesla, it speaks CCS protocol.
James West
Right.
Pasquale Romano
So the software that it’s talking to the charger between the car and the charger standard CCS. With every -- so we have a you visited us pretty big auto interoperability lab. We have long since eating the interoperability elephant to make sure that all the little affordables that every manufacturing does different that we have -- our chargers are software capable of charging a Tesla, because they have to with the adapter.
James West
Right.
Pasquale Romano
Because it’s most of the market. So our cables are modular on our systems, like, they are designed to be unbolted and re-bolted and the holsters are modular because they have to match the cable type.
James West
Right.
Pasquale Romano
So it’s a nonissue.
James West
Yeah.
Pasquale Romano
We have already had different nice cable options in R&D for a long time and so -- and we made an announcement to the effect that they are coming out. So the way I look at this whole thing is, it’s what I call an unfortunate revenue opportunity.
James West
Right.
Pasquale Romano
It’s not like we gave people a guarantee. We will sell them the ability to upgrade the entire field population of DC chargers…
James West
Right.
Pasquale Romano
… out there, because they are all upgradable easily in the field with a cable and a holster change and the software is already sitting in them, because it looks just like it’s charging a car like that for an adapter. So there’s no technical barrier whatsoever. The reason I call it an unfortunate revenue opportunity is I don’t really care which connector people pick. It’s a piece of plastic, pick one.
James West
Right.
Pasquale Romano
Just pick one. They haven’t to make any sense at all.
James West
So I mean I know you said one of the commissions at the federal government level on charging. Do you think the federal government needs to step in and create a standard?
Pasquale Romano
Well, they are…
James West
To pick one.
Pasquale Romano
They have released a statement to the effect that you can’t discount CCS because you have to be able to charge every car.
James West
Right.
Pasquale Romano
I think there were reserves on the commentary. So you can read between the lines that, hey, I don’t think the -- I think it’s not too to say that it’s politically viewed as something that is not good for consumers only because it introduces a non-functionally enhancing, it didn’t do anything for the functionality.
Now additional either cost component to a charger having to maintain more than one cable interface, right, to vehicles, which carry some additional cost burden, right? We thought we were finally rid of and now we have, yeah…
James West
Perfect.
Pasquale Romano
Right. It’s not prevalent in Europe, because the Europeans have done it deregulation. So there’s an example. I don’t know if the U.S. Government is looking that way. But then the question is, what is the real stick?
James West
Right.
Pasquale Romano
What is the real -- they have to tie it to something?
James West
Sure.
Pasquale Romano
They can tie it to credits. They can tie it. They have -- they can tie it. I mean they have already tied it to now, because now they…
James West
That’s the VLC sensor [ph].
Pasquale Romano
Right. All that sort of stuff. But if they want to drive, it -- I don’t particularly care which one.
James West
Right.
Pasquale Romano
I just want it to be one.
James West
Right.
Pasquale Romano
Right. Because I think that’s good for consumers in the market.
James West
Yeah. You also speak a lot about software and the importance of continual software development. You recently crossed $100 million annual revenue…
Pasquale Romano
Yeah.
James West
… in software sales. So what’s your view on this diff -- how this differentiates you in the market, your software versus others, and how large do you think that software business can be over time?
Pasquale Romano
Well, so there’s two very distinct questions in that sentence. In terms of how it differentiates us, it’s the primary differentiator…
James West
Okay.
Pasquale Romano
Aside from the fact that we are an end-to-end solution company, I think, that’s a big differentiator as well, but the software component is a big subcomponent of that being end-to-end. It enables -- it’s one platform for any vertical and we are seeing an increasing number of customers using us for mixed use.
James West
Right.
Pasquale Romano
So I will give you an example.
James West
Okay.
Pasquale Romano
You will see a traditional workplace company that’s using us for workplace, decide that they want their sales force that they give a company car to, to now have our -- use our home reimbursement systems with our home chargers, right?
James West
Okay.
Pasquale Romano
And so now it’s the take-home fleet software is being used over in what is otherwise a workplace customer. You are seeing retailers double-duty fast charge infrastructure for box truck and delivery van charging depending on the hours of operation of the site.
So late night they may charge fleet vehicles and during normal business hours, they may allow consumers to use all or part of the charging infrastructure. So we are seeing a lot of mixed use. We are seeing an increasingly -- increasing percentage.
And then the other thing is the ecosystem that we are tied into. So one of my favorite analogies, as you see able to see a cat when it attaches itself to a screen door, we don’t have screen doors in California, but I had screen doors when I was growing up in New Jersey. No one in California knows what is screen doors.
James West
That’s strange.
Pasquale Romano
It’s very strange because we are not bugs, right?
James West
Right.
Pasquale Romano
Because we have ton of water, so -- until recently. So cat gets it, like, clause into the screen or you can’t like fry the cat off the screen door, right? And so getting yourself hooked into fuel card providers and in-dash navigation systems and iOS mapping and Android mapping and all the other things you plug yourself into, that makes you kind of unextractable.
And then you get into a retailer’s loyalty program via API integration and you get into a commercial real estate operation that’s mixed use and how they manage to delegate administrative rights for chargers for Class A office space renter that has 10 parking spaces that they are running as part of their 10,000-square-foot office or whatever.
James West
Right.
Pasquale Romano
You get all of those software tentacles jacked into the ecosystem and you can’t get the ChargePoint cat off the markets growth, you just can’t. And the analogy I use for people, it goes click right away is Salesforce.com may not be the best CRM system tomorrow. But if I went to my IT team at our size and we are not huge.
James West
Right.
Pasquale Romano
If I said, hey, we are going to extract salesforce because our CFO negotiated a better deal with this.
James West
Okay.
Pasquale Romano
Yeah. No. Because my support people would be like, no, wait a minute here, that’s like tied into my support system, that we got my inventory control system and it’s tied into my ERP system for accounting and is part of our internal, I mean, we got all the internal controls defined around? Are you kidding me? That’s what I am trying to get to.
James West
Right.
Pasquale Romano
Is that are you kidding me?
James West
Right.
Pasquale Romano
Right. When -- right? That’s the real moat.
James West
Right. So do you think that the natural or the charging companies, whether it’s a hardware and software supplier like yourself or whether it’s you go. Do they need to be just charging companies or it’s -- would you consider the umbrella of something else, maybe a larger industrial or if the oil industry continues to kind of move in the direction?
Pasquale Romano
Well, I think it’s pretty different for like Cathy was just up here from EVgo.
James West
Yeah.
Pasquale Romano
And if -- you there, Cathy.
James West
She left.
Pasquale Romano
She left. Of course, she left. I would have stayed for her, if I didn’t have an investor meeting really. Cathy…
James West
She had a meeting.
Pasquale Romano
Cathy is a potential customer and I will eventually in through that, right, because I sell tech, but I don’t own assets.
James West
Right.
Pasquale Romano
Right. And so it’s a very different equation when you asked that question.
James West
Right.
Pasquale Romano
Right. That tends more towards looking like an infrastructure fund.
James West
Right.
Pasquale Romano
Because it’s a return on…
James West
It’s infrastructure.
Pasquale Romano
It’s a return on assets.
James West
Yeah.
Pasquale Romano
Right. Business, so what should that be part of? Well, that’s a whole set of things that can be part of because of that umbrella class of companies. Our umbrella class of companies, right, tech companies, do I look at it as adjacencies? This is a long-term thing, right?
James West
Right.
Pasquale Romano
So imagine when we are at scale, profitable, access to capital returns, all that sort of stuff. Then the question becomes what adjacency you either organically or inorganically get into that you -- that leverages the customer relationships you have?
Because if I say, hey, I want to get into food services, there’s not a lot of leverage with what we are doing. But if we wanted to get into something else in the payment chain, telematic change that are associated with fleet software of -- that’s unattached to the stuff that we do for charger scheduling and things like that. Those are the possibilities. So, yeah, ChargePoint in the long-term could become more than a charging company.
James West
Sure. Right. Okay.
Pasquale Romano
Right. But it’s all about what’s adjacent to you.
James West
Right. Right. Okay. Could you talk a little bit about the U.S. market and the European market and what the differences are in those two markets maybe the...
Pasquale Romano
Better food and wine?
James West
Well, yes, of course, but for the charging business.
Pasquale Romano
For the charging business there’s one main difference. The main difference is they have a phenomena that we don’t have here currently or any more, I should say. 20% of vehicles or so make it to the consumer via your compensation through your company.
James West
Yeah. Particularly in Germany and...
Pasquale Romano
Yeah. Yeah. So the access -- they have a concentrated access to both home and workplace charging that you don’t have in North America. It’s super diffuse in North America. It’s your door knocking…
James West
Right.
Pasquale Romano
… to get it done in North America or you are doing it digitally and having a very broad diffuse sales problems at. There is not nearly the case, because we have now -- what we have done there is we have developed relationships with the leasing companies that serve employers in Europe.
James West
Okay.
Pasquale Romano
So ALD Automotive, which lease plan. So combined, I believe they are number one in Europe. Arval is a customer that was announced, right? We have others that I am not sure if they have ever been announced or not. But we have a large percentage of the total vehicles, but we have access to that TAM.
James West
Okay.
Pasquale Romano
So as they continue to convert their vehicle leasing programs to their customers to electric, we provide the software and the hardware for the home reimbursement programs for the workplace charging and we will get into increasingly kind of more things with them.
James West
Right.
Pasquale Romano
They also do in some cases fleet leasing to business fleets that are using the vehicles for their business, right?
James West
Right. Right. That…
Pasquale Romano
An employee benefit. So that’s a big difference. The other big difference is that when we entered Europe, there was no ChargePoint in Europe. There was a bunch of local players that are…
James West
Okay.
Pasquale Romano
… much smaller on the technology side. I don’t think we could have broken in if there was one of us there, because…
James West
Okay.
Pasquale Romano
… for the same scale discussion that we have.
James West
Right. Right. Right.
Pasquale Romano
So we got rather favorite saying micros, I’d rather be lucky than good and we got lucky.
James West
Right.
Pasquale Romano
That one of those hadn’t happened and it’s usually because access to capital when you are a developing company there on your private is hard.
James West
It’s hard. Right.
Pasquale Romano
So they tend to become local heroes. They live in a vertical -- a small vertical within the country, usually at their headquartered and most of the employees come from. And then their number one goal in life is to stop burning cash before they can’t raise anymore.
James West
Right.
Pasquale Romano
And so that naturally pulls in the horns of the what you can accomplish, because your access to capital is so limited, you have to take the constellation price right out of the gate. And because you get this litany of local heroes, but you have all of these multinational companies that want one fleet platform or one workplace platform where there, you see what I am…
James West
No. No. That’s okay.
Pasquale Romano
Right. So the local hero doesn’t have much…
James West
Right.
Pasquale Romano
… to go on in the long-term.
James West
Yeah. Pasquale, could you just expand upon that, and again, it doesn’t have to be Europe versus North America, but basically, your commercial vehicle, your light commercial vehicle strategy. How is that business different?
Pasquale Romano
Light commercial fleet?
James West
Yeah. In terms of...
Pasquale Romano
Light commercial fleet.
James West
Light fleet.
Pasquale Romano
Yeah. Because when -- just for reference for the folks in the audience, when we reference commercial, we mean businesses that want to provide charging to employees or customers as consumers.
James West
Yeah.
Pasquale Romano
Right. The fleet business is…
James West
Right.
Pasquale Romano
… often referred to as commercial. So in the light commercial super diffuse. So channel there is really important. If you -- dealerships and up fitters are going to be incredibly important, especially if you look at work fleets, they will buy white generic pickup trucks from a Ford, GM…
James West
Yeah.
Pasquale Romano
…Dodge, whatever and then they will up fit them to have all of the racking and power offtake for the particulars of a roofing contractor or an electrical contractor or what have you. So it’s about continuously grooming that channel business. We are a good channel, right?
So that’s the headline is we are good at channel and so it’s about taking all those practices. One-stop shopping is important, because an electrical contracting firm can handle, oddly, the installation of the electrification of their fleet. They are the only one, a roofing contractor.
James West
Yeah.
Pasquale Romano
A roofing contractor doesn’t know what to do.
James West
And is the channel in that regard, the up fitter and they are deciding...
Pasquale Romano
That’s one -- so like everything it’s all of the above, because up fitters will be one, because imagine you are a regional plumbing contractor, so you got a reasonable business. You will have an up fitter or a set of up fitters that you use. And when you want to electrify transportation, your main business is plumbing, you are going to just -- you are going to say, can you just solve this for me?
James West
Yeah.
Pasquale Romano
Just tell me how this works and like I will buy the electric one, a piece, I get the lower cost and no maintenance and the fuel charges are better and power offtake, by the way, is a big deal for them. So they got you don’t have to leave the vehicle run when you want to…
James West
Yeah.
Pasquale Romano
… basically plenty of electrical outlets for tools and supplies and things like that, so all good. Just don’t let me do this myself.
James West
Yeah.
Pasquale Romano
Don’t make me think about it. I am busy, right, handle it. That’s what we commit.
James West
Because the charging destination actually could be the individual operator brings it home, right?
Pasquale Romano
And we deal with the take on fleet…
James West
Yeah.
Pasquale Romano
That’s more often than not but…
James West
Yeah.
Pasquale Romano
That’s more often than not. You will see the work truck in the driveway if you drive from your neighborhood and you actually pay attention to it. And then you have got the behind fences at the site if they have a little roll-up garage door at a commercial site they want some charging there.
So they might go to the up fitter. They may go to one of our specialty channel partners. They may go to an electrical distribution firm like our standard channel. They all have to be enabled to be able to get to light commercial, because light commercial is very long tail. It’s most of the fleet vehicles in the U.S. and its super long tail.
James West
Okay. So maybe let’s talk a little bit about some of the partnerships you have. I mean, you recently announced one with Stem. You had the one with the U.S. Postal Service. You have Mercedes-Benz as well.
Pasquale Romano
Right.
James West
How are those helping you kind of -- one kind of involved your strategy, maybe with the Stem to be a conversation about that and the other is to accelerate the growth of the charger network?
Pasquale Romano
So some of the partners that you talked about there, our partner/customers, right?
James West
Right. Sure.
Pasquale Romano
Right. And some of them are truly like we want to go to market and we need a component in the solution that’s a significant complexity, but we don’t want to make that.
James West
Right.
Pasquale Romano
Right. So let’s take the Stem partnership.
James West
Right.
Pasquale Romano
That’s perfect. There -- especially with the current incentives now, there are situations where storage cancels.
James West
Right.
Pasquale Romano
So you have got a company that wakes up every day thinking…
James West
All about storage…
Pasquale Romano
… they got all that. I got plenty of fish to fry on the charging side.
James West
Right.
Pasquale Romano
And we have forgotten more about charging the Nano and vice versa.
James West
Right.
Pasquale Romano
So readymade partnership, because when we are going after a customer site, if you have a well in a pre-integrated solution, it’s just -- it’s the easy button.
James West
Right.
Pasquale Romano
It’s the easy button and that in certain scenarios where storage cancels, it moves the needle, especially if you can’t get the utility drop sizes that you need.
James West
Right.
Pasquale Romano
You can use it in that setting as well. So it’s a good example of a partnership, right? If you look at the fuel card, their customer and partners as well, because if we are WEX and it’s for us UTI and BTA in the U.S. The -- if you look at those, they are providing liquid fuel cards for years to fleets that -- businesses that want to give a card to their employees and say, look, whenever you fill up at a gas pump, use this card and they got pre-negotiated rates and the auto reimbursement and the accounting and all that’s tying into expense reporting…
James West
Okay.
Pasquale Romano
… and all that great stuff taxing, VAT rules, all that stuff. And so we are powering the electricity domain equivalent…
James West
For that, yeah.
Pasquale Romano
…for that.
James West
Yeah.
Pasquale Romano
And so they look like a channel partner…
James West
Right.
Pasquale Romano
… to some degree, because in a weird way, right, because that’s pulling through a ton of charging licenses…
James West
Right. Right.
Pasquale Romano
… and hardware and stuff, because that’s not what they want to make.
James West
Right. Right.
Pasquale Romano
So, again, and that speaks to the -- that’s one of the little clause of the cat on the screen door, right?
James West
Right. Right.
Pasquale Romano
And now do all that software engineering work and it’s not going to cancel for -- until you hit volume, so imagine…
James West
Right.
Pasquale Romano
… how much work you have got to do to…
James West
Yeah.
Pasquale Romano
… plug into a business system like that and not have it return until the volume shows up always later…
James West
Yeah.
Pasquale Romano
… because we are still in early innings here with the electrification and transportation, so liquid fuel world generally.
James West
Right. Right.
Pasquale Romano
So that’s the hard part.
James West
So the NEVI program, there’s been a lot of back and forth, and the money is not flowing yet.
Pasquale Romano
For the record, we called that one…
James West
You call that one.
Pasquale Romano
… to go time with us.
James West
Do you -- I mean do you think we are at the point now we are starting to make some real progress or we are going to keep being delayed?
Pasquale Romano
It’s not -- so from our advantage point, it’s not delayed.
James West
Well, fair enough. Okay.
Pasquale Romano
So from our advantage point, it’s running about, so to -- we just -- I think it got announced and I forget what date it was, because it’s like -- it’s mind boggling. It’s still happening. We just got another VW Appendix D Award. Dieselgate, remember from…
James West
Yeah.
Pasquale Romano
… Quinn. That’s still happening…
James West
Yeah.
Pasquale Romano
… now and so the -- when I used to get the question when the Infrastructure Bill was even on the table before it was even ratified. I would get the question from investors. So like are -- is this going to show up this year in your numbers, this is like back in 2022…
James West
Yeah.
Pasquale Romano
…20 -- no, 2021 and I was like, are you kidding me? I said, me -- I said, this is best case, the 2024 phenomenon and they couldn’t get their head around that. But based on our experience, it looked just like Appendix D to had to get federal guidelines -- first, you have to get the…
James West
Right.
Pasquale Romano
The bill passed and you need to get federal guidelines. The federal guidelines go to the states. The states have to develop their programs. Put it -- a lot of them issued an RFIs [ph], say, what the hell should we do.
James West
Right.
Pasquale Romano
Right. They finally get the RFPs out. Then you have to have a response period that’s appropriate. We have to go chase all the partners because we don’t get the money.
James West
Right.
Pasquale Romano
It’s customers of ours that we coordinate with the money…
James West
Right.
Pasquale Romano
… because we are not the asset owner.
James West
Right.
Pasquale Romano
And so it’s running about on schedule and you will probably see it start to show up as a trickle sometime in 2024.
James West
Okay.
Pasquale Romano
And you got four states that are live right now…
James West
Right.
Pasquale Romano
…. with good responses…
James West
Right.
Pasquale Romano
… and more coming, and this by the way, what my policy team points out to me is they are, like, just remind everyone, this is round one.
James West
Right.
Pasquale Romano
Yeah. This is round one. There’s five rounds. This is round one.
James West
Fair enough. How are you thinking about your product roadmap from here? I mean, I know when I toured your facility, it’s -- you have really simplified everything. You made it all modular. Are you looking at higher voltages? Are you looking at other...?
Pasquale Romano
We are already at 100 volts to 1,000 volts on…
James West
Okay.
Pasquale Romano
… our fast charger architecture. So there’s nothing.
James West
Okay. You don’t do anything there?
Pasquale Romano
Yeah. I mean we are looking at some novel. We are looking at where the standards are going. So I will give you some -- I will give you some statistics…
James West
Okay.
Pasquale Romano
… that we have generally talked about on that and this is like the recorded anyway.
James West
Right.
Pasquale Romano
So the -- I guess it’s equal access for everybody. But you have got -- in terms of dispensers to cars, if you look at power levels, it’s typically limited by the AmpRidge that is legal over the connector standard.
James West
Right.
Pasquale Romano
Okay. There is -- there are revisions in the works of the connector standards to be able to go to both higher voltage, slightly higher voltage, we can already run at a 1,000.
James West
Okay.
Pasquale Romano
And higher AmpRidge, back were compatible, of course, with the current standards, assuming. Another surprise doesn’t happen we get a third connector…
James West
Right.
Pasquale Romano
… which would be hell. But, so our liquid-cooled cable systems that were part of the announcement on the Mercedes-Benz program, those liquid-cooled cable dispensers have the capacity in one dispenser to do two 500-kilowatt ports,500 amps or a single 1,000 amp, except that there’s no connector that will handle a megawatt…
James West
Right.
Pasquale Romano
Right. So when there’s a megawatt standard, that’s a relatively small incremental refinement to the internal system…
James West
Okay.
Pasquale Romano
… because we have already got the electronics and the internal system readied for megawatt charging for dispensation. Dispensation, by the way, is far bigger issue.
James West
Right.
Pasquale Romano
It’s not power conversion. You can volt five cabinets, five 200-kilowatt cabinets together get a megawatt.
James West
Yeah.
Pasquale Romano
It’s not hard.
James West
Right.
Pasquale Romano
It’s can you get it to the vehicle.
James West
Right.
Pasquale Romano
Right. So we have had analysis before thought to basically set up for that. So that’s -- that will happen and it will happen gated more by standards and connector fights between OEM than it will…
James West
Right.
Pasquale Romano
… by us. We will be ready early there. We do have -- if you look at our trends, we have upgraded every platform that we have to be a world platform, meaning it will handle world grid requirements, single phase, three phase, all the different little portals that you get all over the world, it’s on the hardware side, now our software stuff coming.
James West
Right.
Pasquale Romano
So if you look at the products and services that -- the products that don’t have a world platform, you can kind of guess…
James West
Right.
Pasquale Romano
… where that’s going in a very short timeframe.
James West
Okay.
Pasquale Romano
Okay. And then if you look at some -- on the power conversion side, we are looking at some pretty novel next-generation architectures that I think will really kind of be very groundbreaking, but that’s coming and that’s -- we are not announcing the timeframe for that stuff yet. On the software side, we bought two companies…
James West
Yeah.
Pasquale Romano
… not that long ago and we are well on our way of a new version of our software cloud infrastructure that is a super set and a full combination of everything that was good about all three of those systems and there was good stuff on all three of those systems.
James West
Right.
Pasquale Romano
But good in a non-overlapping way, like, really, well, that’s a pretty good idea.
James West
Okay.
Pasquale Romano
And they will be, like, well, gee, this is a pretty good idea on the legacy ChargePoint side and vice versa. So we are creating a best-of-breed, fully micro serviced. We are very heavily invested in cybersecurity. It’s next level security, incredible API flexibility for our screen door partners.
James West
Right. right.
Pasquale Romano
So lots of great stuff coming on the software side. It will be much more fluid too in terms of third-party app developers being able to develop literally applications on our cloud in a really flexible way. So you can all kinds of other companies writing applications for ChargePoint over time. That’s sort of the vision that we have for software there. We are doing a lot on the -- we are doing a lot on mobile, a lot on in-dash integrations. Roaming continues to see, we are up to 500,000 roaming or so…
James West
Right.
Pasquale Romano
It’s quite a bit. So more of that. That’s where we are spending the money. And then the boring stuff is where we are spending a lot of money, but we don’t ever talk about it, which is customer onboarding automation, support automation, all the internal business systems to handle the scale, right?
James West
Right. Right.
Pasquale Romano
All stuff.
James West
Anyone in the audience have questions for Pat? Everybody out today.
Pasquale Romano
I think it’s the end of the day.
James West
Yeah. Well, I will ask one more. So what should we be looking for over the next 12 months to 24 months in terms of the financial guidepost?
Pasquale Romano
Well, I mean, I think, we talked about that on the earnings call…
James West
Yeah.
Pasquale Romano
… more out of necessity, because I -- look, it’s a new industry, it’s hard for me to give arms around how investors should build their own models on top of the models that you guys provide for your research customers. So it’s -- we put a number out there for Q4 on the adjusted EBITDA…
James West
Yeah.
Pasquale Romano
…cutting it by two-thirds. We felt that we really needed to provide a dot to be able to snap the line to profitability, because I just -- there were too many variables. The spread…
James West
Right.
Pasquale Romano
…the spread -- the pattern spread on that, I think, was too wide, it wasn’t doing the market any service. So we basically put that out there saying, okay, if you put that out there and you see we have been managing OpEx over five quarters…
James West
Yeah.
Pasquale Romano
… pretty judiciously and that’s going to continue, although, we did comment that it’s not going to -- it’s not like it’s going to be not increased.
James West
Sure.
Pasquale Romano
It’s just the operating leverage is quite healthy. If you can kind of generally put the operating expense in a band and you can put the adjusted EBITDA in a band and you certainly can put -- you can see the margin improvement.
James West
Right.
Pasquale Romano
So you can kind of put that in the band, you can certainly put the revenue in a band. And so there you go, we are…
James West
Yeah.
Pasquale Romano
We are a revenue times margin less OpEx is adjusted EBITDA kind of company.
James West
Right.
Pasquale Romano
So it’s not too hard to…
James West
Right.
Pasquale Romano
There’s no -- you don’t need to spreadsheet to model the company at that level.
James West
And Pat, do you see the supply chain getting easier, I mean, obviously, it’s still immature. Also in its infancy, do you see it getting better than it’s been over the last 12 months to 18 months.
Pasquale Romano
Well, it’s gotten a lot better and would -- are we investing in stepped up supply relationships? Yeah, absolutely. I mean I mentioned the capacity reservation agreements that we have in place on key things that we don’t see unwinding as fast from a demand -- from a supply perspective.
By the way, one of the biggest worries I don’t know if I mentioned it was, the super heating of solar due to all the incentives, that consumes the same power MOSFET infrastructure that we need. So if you don’t have reservation agreements, you have got to carve out your lane because the solar guys a much more mature market, much bigger…
James West
Yeah.
Pasquale Romano
Right. You don’t want to get crowded out by solar and not be able to ship a charger.
James West
Make sense.
Pasquale Romano
And it only affects our fast chargers. But it’s so important. So we have -- with that aside, having to manage that in a very unique way, the balance of the supply chain has gotten tremendously better.
And could -- in my career, I have seen spot issues happen like you get a political instability somewhere where there’s a source of supply of raw material…
James West
Yeah. It’s like gone away.
Pasquale Romano
No one probably is old enough to remember the siren that tantalum capacitor factories in the Far East, they were like kind of the big lion’s share, you couldn’t get tantalum capacitors. Like so that stuff can happen.
James West
Yeah.
Pasquale Romano
And you can wake up one morning and being an emergency mode. Barring that…
James West
Yeah.
Pasquale Romano
… it’s a lot.
James West
You are not going to look. Yeah. Perfect. Yeah. Finals.
Pasquale Romano
We have 33 seconds.
James West
I give them time. Pat, thanks so much. Very thanks.
Pasquale Romano
Thank you, James.
James West
Yeah.
Pasquale Romano
Thank you, James.
James West
Yeah. Thank you, sir.
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